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Complementarity between heterogeneous human capital and R&D: can job-training avoid low development traps?

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Abstract

This paper uses a non-overlapping generations model of endogenous growth to emphasize the effect of human capital’s heterogeneity on economic growth. In addition to education, we present two different typologies of training. The first, technology-general, is independent of R&D; the second, technology-specific, is connected to the success of innovative activities and it is only provided to workers engaged in research. By extending Redding (Econ J 106:452–470, 1996), we demonstrate that human capital composition is important in determining the probability of innovation and the economy’s growth rate. Moreover, the paper shows that technology-general training avoids low development traps when R&D is absent.

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Notes

  1. For a brief overview see Scicchitano (2007).

  2. See Benhabib and Spiegel (1994).

  3. See for example, empirical studies by Bartel and Lichtenberg (1987), Benhabib and Spiegel (1994, 2005), Krueger and Lindhal (2001), Hall and Jones (1999). From the theoretical point of view, in particular, Lloyd-Ellis and Roberts (2002), by demonstrating that the interaction between skills and technology at the aggregate level exhibits bounded complementarity, point out the implications for growth.

  4. See for insance, Barrett and O’Connell (2001), Dearden et al. (2000), Loewenstein and Spletzer (1999) and Pischke (2001).

  5. The complementarity between education and training is a well accepted hypothesis in training economics: see Ok and Tergeist (2003), Brunello (2004) and Ariga and Brunello (2006).

  6. Following Redding (1996) Aj,t(i) denotes also the quality of the technology used by entreprenuer.

  7. In a matching/searching model the assumption of full employment is not a necessary condition for an imperfect labour market. See, for instance, Acemoglu (1994, 1997).

  8. Formally, we adopt an asymmetric Nash bargaining solution, in which workers and entreprenuers, depending on the bargaining power, share the surplus: \( \underset{^{L,w}}{Max}\,\pi \left( L,w\right) ^{1-\beta }\left( w-w_{0}\right) ^{\beta }\).

  9. In order to compensate for the cost of training supported by firms when they do not innovate and provide T-G T, and in order to press firms to provide this typology of training, workers could accept a lower wage in exchange for training. They would have a trade-off between wage and training. Hence, we could have the following situation:

    $$ E \left[ w_{2}^{S}(i) \right] =\left\{ \begin{array}{ll} \beta \left[ \lambda \mu +(1-\mu) \right] A_{1,m} & \quad \hbox{ for workers engaged in research activity} \\ \beta A_{1,m}& \hbox{ for workers engaged in no research activity} \end{array} \right. $$

    when firms provide T-S T, and

    $$ E\left[ w_{2}^{G}(i) \right] =\left\{ \begin{array}{ll} \beta^{\prime}\left[ \lambda \mu +(1-\mu) \right] A_{1,m} & \quad\hbox{ for workers engaged in research activity} \\ \beta^{\prime}A_{1,m} &\hbox{ for workers engaged in no research activity} \end{array} \right. $$

    when firms provide T-G T, where β′ < β.

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Acknowledgements

I would like to thank Nicola Acocella, Alberto Bucci, Guido Cozzi, Giuseppe Croce, Maurizio Franzini, Massimo Giannini, Mario Nuti, Mario Pianta, Damiano Silipo, Erik Smith; participants at the 3rd Annual Conference, in the GEP, Nottingham University, at the 1st CRISS Annual Meeting for Young Economists, University “La Sapienza” of Rome, at the conference Economic Growth and Distribution: on the Nature and Causes of the Wealth of Nations, Lucca, Italy, at the Xth SMYE Conference, Geneve, at the NOEG 2006 Conference, Wien, at the EALE 2006 Conference, Prague, at the SIE 2006 Conference, Verona, at the RES 2007 Conference, University of Warwick (UK), at the AIEL 2008 Conference, University of Brescia and three anonimous referees for their valuable suggestions and comments. Furthermore, I would like to thank Abhinay Muthoo, because part of the revision of the original draft was carried out while I visited the Department of Economics, Essex University, which provided excellent hospitality. The views axpressed in this article are those of the author and, in particular, do not necessarily reflect those of the Ministry of Economic Development. The usual disclaimer applies.

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  1. Faculty of Economics, Department of Public Economics, University “La Sapienza” of Rome and Ministry of Economic Development, Via del Castro Laurenziano 9, 00161, Rome, Italy

    Sergio Scicchitano

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Appendix

Appendix

Proof of Proposition 8: Suppose that

$$ \tau ={\frac{C(\tau) }{A_{1,m}\left( 1+\gamma \nu ^{\theta }\right) h_{1,t}\left( 1-\mu \sigma \right) }} $$

From (9) entrepreneurs are indifferent between T-G T and T-S T training.

Consider a subsidy to the cost of training γ > 0, such as

$$ \tau ={\frac{C(\tau) -\gamma }{A_{1,m}\left( 1+\gamma \nu ^{\theta }\right) h_{1,t}\left( 1-\mu \sigma \right) }} $$

Now, employers prefer T-G T; if they are able to innovate (μ = ψ) and \({\frac{\psi ( \lambda -1) (1+\tau) \sigma }{1+\rho }}>{\frac{\alpha ^{\ast }\left[ 1-\left( \nu _{0}^{g}\right) ^{\vartheta }\right] }{\left[ 1+\gamma \left( \nu _{0}^{g}\right) ^{\vartheta }\right] }},\) then the “High-Growth Equilibrium” emerges.

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Scicchitano, S. Complementarity between heterogeneous human capital and R&D: can job-training avoid low development traps?. Empirica 37, 361–380 (2010). https://doi.org/10.1007/s10663-009-9113-8

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